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The Trump administration is set to add SMIC chipmaker and offshore oil and gas explorer CNOOC to a list of companies blocked from U.S. investment due to military ties, Reuters reported in the latest passage of the United States in Beijing before President-elect Joe Biden takes office. .
Semiconductor Manufacturing International Corp. and China National Offshore Oil Corp. are among four Chinese companies to be added to a list of companies owned or controlled by the military, Reuters reported, citing a document seen and three unidentified people familiar with the matter. Their addition – along with China Construction Technology Co. Ltd. and China International Engineering Consulting Corp. – would bring the total number of blacklisted businesses to 35.
It was not clear when the new list would be published in the Federal Register, Reuters said. The Defense Department did not respond to Reuters’ request for comment.
CNOOC has yet to receive any official notification or decision from a relevant U.S. government agency, the company’s listed unit said in an exchange case in Hong Kong. The unit, Cnooc Ltd., fell 14% on Monday. China Oilfield Services Ltd., its drilling subsidiary, fell 15%.
“There will be a huge impact on the business because the oil and gas value chain involves many American companies from the upstream, the middle of the chain to the gas side,” said Sengyick Tee, analyst at SIA Energy. “It also means they can’t source parts and software from US companies.”
A Pentagon spokesperson did not immediately respond to Bloomberg’s request for comment on the report. Reuters separately reported last week that the Trump administration was set to release a list of 89 Chinese aerospace companies and others that could not access US technology exports because of their military ties.
President Donald Trump, a Republican, continued to deploy punitive measures against China despite the loss of the US presidential election earlier this month to Biden, a Democrat. These actions will make it harder for the new administration to defuse tensions with Beijing, although they will undoubtedly give the US side more weight in future negotiations.
The Chinese Foreign Ministry said it was against the politicization of cooperation between the two countries. “We hope the United States will provide an open, fair and non-discriminatory environment for Chinese companies working in the United States instead of extending the concept of national security and imposing sanctions or discriminatory measures on Chinese companies, ”the Chinese company said on Monday. ministry spokesperson Hua Chunying.
In a related executive decree earlier this month, the United States said China is “increasingly exploiting” American capital for “the development and modernization of its military, intelligence and security apparatus,” which posed a threat to the United States. The order bans investment firms and pension funds from buying and selling shares of 31 Chinese companies designated by the Pentagon since June as having military ties.
Exxon, Shell
The state-owned CNOOC, the country’s leading deep-water oil and gas explorer, has ties to major global energy producers and projects. The company is one of the partners of Exxon Mobil Corp. in its project in Guyana, owns a stake in a Royal Dutch Shell Plc LNG export terminal in Australia and a stake in the Buzzard North Sea oil field in the United Kingdom.
CNOOC’s main base of operations are the coastal waters surrounding China, which account for more than 60% of its listed company’s output, the majority coming from the Bohai Sea near Beijing.
“This will be quite negative for CNOOC as it has quite a few American partners in projects alongside Bohai Bay as well as in the South China Sea,” Lin Boqiang, director of the China Center for Energy Economics Research, told the phone by phone. ‘University of Xiamen.
Operations in the South China Sea, which account for around 29% of production, have at times sparked controversy as China claims rights to drill in waters far from its borders and within 200 miles of countries like Vietnam and the Philippines. The company also has interests in shale and deepwater projects in the United States, producing production of about 67,000 barrels of oil equivalent per day, according to its website.
The SMIC said in a statement that it was engaged in constructive discussions with the U.S. government, adding that it had no relationship with the Chinese military and did not manufacture for military purposes. Its shares have changed little in Hong Kong.
SMIC Restrictions
In September, the U.S. Department of Commerce separately imposed export restrictions on the minimum wage, forcing U.S. companies to apply for a license to ship certain products to China’s largest chipmaker. The SMIC and its subsidiaries present “an unacceptable risk of diversion to use for military purposes,” wrote the Ministry’s Office of Industry and Security.
The minimum wage is a cornerstone in China’s vision to create its own world-class semiconductor industry, which the Communist Party sees as an essential basis for a self-sustaining technology sector. The company is the nation’s largest contract chip maker and raised more than $ 7 billion to expand through a share offering in Shanghai in July.
The minimum wage still has a lot to do Until rivals such as Taiwan Semiconductor Manufacturing Co., which makes chips for Apple Inc.’s most advanced smartphones. TSMC, the world’s largest contract chip maker, markets 5-nanometer technology, at least two generations of ahead of the capacities of the minimum wage.
A Trump administration blacklist would make this effort more difficult, if not impossible, as the minimum wage could be excluded from U.S. suppliers such as Applied Materials Inc., which tend to make the most advanced chipmaking equipment.
– With help from Dan Murtaugh, Sarah Chen, Debby Wu, Qian Chen, Max Zimmerman, Peter Elstrom, Serene Cheong and Colum Murphy
(Updates with CNOOC commentary in 4th paragraph, Chinese Foreign Ministry commentary in 8th paragraph.)
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